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If you have invested in real estate for any length of time at all you would have come to the realization that the #1 problem in real estate investing is making payments on empty houses. This might seem obvious at first glance, but when month end rolls around and that payment is due, it suddenly becomes VERY personal and painful.
We have invested in real estate for some time, and doing lease purchases was our major exit strategy. We kept statistics of what it took to sell our houses. Here is what we found: 40-> 10-> 1. If we get forty calls on a property, 30 people will be screened out because they don't have a down payment or are not ready to move, 10 couples will look at the house, and 1 couple will end up wanting it. Then you still have to decide if you want them. If you don't, then you're right back to 40-> 10-> 1.
So it doesn't take a rocket scientist to figure out that the secret is to get 40 to 80 calls as quickly as possible. We are in Atlanta, GA, and to run a 10 day ad in the major newspaper costs $480. We averaged 3 to 5 calls a week from an ad like that. To get 40 calls would take 8 weeks! We added yard signs, and that got us about 3 calls a week. So now we have it down to 5 weeks. Still completely unacceptable because if it takes 5 weeks to get 1 person that wants the house, if we don't want them, we are another 5 weeks away from the next buyer (statistically speaking). That means $480 times 2, plus two mortgage payments. You do the math, but that adds up to $3,000 or more in a hurry.
So we sat down and thought about it, and wondered if there was a way where we can avoid the 30 calls that goes nowhere, and only speak to the 10 people that have a down payment and are ready and motivated to move. The next challenge was to talk to those 10 people in less than a week, instead of waiting 5 weeks. The main reason being that if we have 10 motivated tenant/buyers, odds are 1 of them will want the house, and they need to give 30 days notice from where they are moving from. That way we have a contract in one week, they have 3 weeks to give notice (I may offer to pay the one week penalty if their down payment is big enough), and we don't have to make more than one mortgage payment before the house is sold. Of course if we bought subject to and negotiated a 3 month seller paid mortgage period, then we are ahead two months.
That's why we built www.leasepurchaseleads.com. My prescreening is now even better. Not only do I know the size of the down payment this rent-to-own lead has, I know what the maximum rent is that they are willing to pay. I can see how many bedrooms and bathrooms they want, and I can see which part of town they are interested in. If I have a house just like the one they are looking for, and they can afford the rent I want, and I like the down payment they have available, then I have just completed the perfect pre-screening. Now I may only have to talk to 5 people, not 10, because my prescreening is much more efficient.
Additionally, I saved two mortgage payments, and at least two, maybe three newspaper ads, sometimes much more. Paying $20 a lead five times to get my vacancy filled quickly? Priceless.
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